Reserve cotton sales maintained a 100% turnover rate for consecutive weeks, yet market sentiment is far from monolithic. During Aug 24-28, the weekly average price hit 17,463 CNY/ton, 1.2% higher than the cumulative average of 17,264 CNY/ton since Jul 20. However, the average premium narrowed to 1,184 CNY/ton, down from the cumulative 1,434 CNY/ton. The coexistence of rising volume and cooling premiums reflects a paradox: textile mills are eager to restock but reluctant to chase higher prices.
Transaction Structure: Demand-Driven, Regional Concentration Rising
This week, 40,100 tons of reserve cotton were offered, all sold, maintaining a 100% turnover rate. By category, Xinjiang cotton averaged 17,413 CNY/ton, while imported cotton reached 17,482 CNY/ton, a gap of 69 CNY/ton—significantly narrower than the cumulative gap of 415 CNY/ton. This suggests the cost advantage of imported cotton is fading, and procurement preferences are subtly shifting.
Looking at buyer registration provinces, Shandong, Hubei, and Jiangsu together purchased 21,000 tons, accounting for 52.34% of the weekly total. This regional concentration is higher than in previous weeks, indicating synchronized restocking among textile clusters, which may exacerbate raw material inventory divergence in other regions. Provinces like Henan and Zhejiang, not in the top three, could face temporary cost disadvantages.
Narrowing Premiums: A Watershed in Price Expectations
The premium is a key sentiment indicator. This week's 1,184 CNY/ton premium was 17.4% lower than the cumulative average of 1,434 CNY/ton, marking a third consecutive weekly decline. This suggests that while mill operating rates remain high, optimism about future cotton price increases is waning. The discounted 3128 price of 18,172 CNY/ton is still 200-300 CNY/ton below spot market levels, maintaining a price advantage that is slowly eroding.
For buyers, narrower premiums mean less aggressive bidding and more stable costs. But caution is warranted: imported cotton premiums (1,232 CNY/ton) remain higher than Xinjiang's (1,051 CNY/ton), indicating persistent demand for high-grade cotton. If the domestic-import spread narrows further, imported cotton's appeal may decline, strengthening Xinjiang cotton's pricing power.
Policy and Market: The Game of Release Pace
Since Jul 20, cumulative releases total 240,683.76 tons, all sold, with a 100% turnover rate and an average price of 17,264 CNY/ton. The steady release has supplemented market supply and curbed excessive price rallies. However, weekly volumes have stayed around 40,000 tons without significant expansion, signaling a policy preference for stability over suppression.
For textile mills, the high turnover reflects rigid restocking needs—yarn orders are decent, but raw material inventories remain low. Yet the narrowing premiums also warn of downside risks: if the release pace remains unchanged before the new cotton crop arrives, prices are likely to fluctuate in a range. A sudden drop in international cotton prices could drag domestic prices down. Companies should avoid overstocking at high prices and maintain flexible procurement strategies.